A stock split takes place when a company divides existing shares into multiple shares. Technically speaking, stock splits don’t change the value of a company, or their investors' holdings.
This strategy does however, reduce the price of individual shares, which can make a stock more accessible to retail investors, especially when the price of shares reach a level deemed too high for small investors.
A lower share price can make the stock more attractive to a broad range of investors, not all of whom could afford a stock priced at $1,640 in the case of the electric car-maker like Tesla. (NASDAQ:TSLA).
The rally in Tesla shares since the company announced a stock split shows the growing influence of retail investors on the market where large institutional investors have taken a back seat since the COVID-19 pandemic.
Tesla early this week announced it would split its shares in a 5-for-1 exchange, a move designed to make the stock less expensive after it soared 300% this year. Shares of Tesla closed 13.12% higher Wednesday as investors continued to rally on the stock split news. Yesterday, the stock gained just over 4.2% again, closing at $1,621.00. Tesla will start trading on a split-adjusted basis Aug. 31.
Tesla 1-Week Chart
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